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TAX HEAVENS IN THE WORLD

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By Fahad Murad

The World’s Best Tax Havens But No Pakistan. Why?

Tax Heaven is the place where Companies enjoys their Tax Free Capital.. Countries who have zero or Low Tax rates are the Highest attention seekers for multinational companies. Pakistan have high Tax rates therefore Multinationals avoid to Invest in Pakistan. Their are almost U.S 500 Forbes who loves to save their taxable income. Following are the List of Tax Heaven countries.

Bermuda

One of the most expensive country, Bermuda features a 0 percent corporate tax rate, as well as no personal income tax, according to PWC’ and Deloitte’s worldwide tax guides. Due to the lack of corporate taxes, U.S. multinational companies have raked in huge amounts of money in Bermuda, notably recording profits of $104 billion in 2017

One company that used the country’s zero corporate tax rate to boost profits is Nike. Nike shifted large sums of money to Bermuda by opening a subsidiary called Nike International Ltd.

The subsidiary did not appear to have a local office or employees, but “it charged large trademark loyalty fees to Nike’s European headquarters,” reports The Guardian. So, the company was able to move profits from Europe to Nike International Ltd in Bermuda, according to the report.

Netherlands

The most popular tax haven among the Fortune 500 is the Netherlands — with more than half of these companies reporting at least one subsidiary there in 2018, according to the ITEP report

National governments often use tax incentives to lure businesses to invest in their country. However, tax incentives have often been found to be ineffective, inefficient and costly, according to Oxfam policy paper that identified the top corporate tax havens. In the Netherlands, one such tax incentive cost an estimated 1.2 billion euros in 2016. That is equivalent to 7.6 percent of what the Netherlands receives in total income from corporation tax,

Nike also used the Netherlands’ tax policies to its advantage, according to the Paradise Papers. In 2014, Nike moved its intellectual property to Nike Innovate CV, a Dutch subsidiary, reports CBC News. The Netherlands’ CV designation — which stands for “commanditaire vennootschap” or limited partnership — can potentially allow a company to avoid paying Dutch taxes, according to the media outlet

Luxembourg

Like the Netherlands, Luxembourg is one of the three countries that form the Benelux countries, which also have a reputation for being tax shelters. Luxembourg’s tax-haven status comes from its business-friendly laws that allow international companies to take advantage of Tax Loopholes. In fact, over 35 percent of all Fortune 500 companies had one or more subsidiaries in Luxembourg in 2016, according to the ITEP report.

Cayman Islands

The Cayman Islands offer “probably the biggest [tax] loophole now for individuals as well as the multinational corporations,” said Crystal Stranger, president of 1st Tax Inc

American multinational companies reported $46 billion in profits from subsidiaries based in the Cayman Islands, according to the ITEP report. Meanwhile, the gross domestic product is just $3 billion for the territory

Singapore

Singapore is a hub for multinational corporate subsidiaries. Like the Netherlands and Luxembourg, Singapore actually has “reasonable nominal corporate tax rates,” Yet, like those nations, Singapore still finds a way to be one of the top tax havens in the world. More than 40 percent of Fortune 500 companies had subsidiaries in Singapore in 2016, according to the ITEP report.

Singapore charges a flat corporate tax rate of 17 percent. But according to Oxfam, the country offers tax incentives and also doesn’t withhold taxes.

Channel Islands

The Channel Islands consist of two British Crown dependencies that are not part of the United Kingdom: the Bailiwick of Jersey and the Bailiwick of Guernsey.

Jersey has no inheritance tax, capital gains tax or standard corporate tax. This has made Jersey a popular tax haven for major companies — including Apple. The Paradise Papers reveal Apple shifted key parts of its business to Jersey to keep its taxation low, reports The Guardian. One of its subsidiaries there is believed to be worth more than $250 billion

The Channel Islands host various international corporate subsidiaries. For example, Morgan Stanley alone has 30 tax haven subsidiaries in the Channel Islands, according to the 2017 report by ITEP.

The Isle of Man

The Paradise Papers reveal the Isle of Man government approved tax avoidance schemes that have refunded over $1 billion to the super-rich on luxury plane imports, reports The Guardian. According to the report, private jet owners were able to claim 100 percent VAT refunds, claiming the planes were part of “leasing businesses.” But, the papers say millionaires were actually leasing their own aircraft from themselves.

In addition to tax benefits — like a zero percent standard rate of corporate income tax — the Isle of Man has also been known to offer great benefits for pensions. “Many international companies have their employee pension plans held in accounts in this small country due to asset protection and the ability to take benefits from the age of 50 onwards,”

Only employer-sponsored retirement accounts will benefit from this lax tax code, though, as “individually held international mutual funds are taxed heavily under U.S. tax law,”

Ireland

Ireland is often referred to as a tax haven, despite Irish officials asserting that is not the case. However, a Congressional Research Service report found

that American multinational companies collectively reported 43 percent of their foreign earnings in five small tax haven countries: Bermuda, Luxembourg, the Netherlands, Switzerland and Ireland, according to the ITEP report.

Despite insisting it is not a tax shelter, Ireland has been embroiled in legal cases involving corporate taxes. For example, a Senate investigation of Apple discovered that two of the company’s Irish subsidiaries were not classified as tax residents in the U.S. or Ireland, despite being incorporated in the latter country, according to ITEP. After the government crackdown, Apple moved its offshore funds from Ireland to Jersey, the Paradise Papers say.

Mauritius

Mauritius made Oxfam’s list of the top corporate tax havens at No. 14. According to the  ITEP report, corporations that have been known to have subsidiaries in Mauritius include: Goldman Sachs (41 subsidiaries), Morgan Stanley (15 subsidiaries), JPMorgan Chase (13 subsidiaries), Citigroup (six subsidiaries) and Pepsi (two subsidiaries).Mauritius has a low corporate tax rate of 15 percent.

Monaco

Monaco doesn’t charge its residents income tax. This has drawn some of the world’s wealthiest people to the tiny country, as almost one in three residents is a millionaire, reported CNN Money .Companies earning more than 25 percent of their revenue outside of Monaco and companies whose activities consist of earning revenue from patents and literary or artistic property rights are subject to a tax of 33.33 percent on profits — but there is no direct tax on companies. And corporations like Citigroup, Hertz, Tesla and Walgreens reportedly have tax subsidiaries there, according to the ITEP report.

Switzerland

Switzerland is a popular financial center for individuals and corporations alike. In fact, Zurich is the No. 9 most competitive financial center in the world and one of the most broadly and deeply established, according to the September 2017 Global Financial Centers Index from Long Finance. ITEP found that the companies with subsidiaries in Switzerland include Marriott, Pepsi and Morgan Stanley, among others.

U.S. companies have taken advantage of Switzerland’s tax benefits for years. A Congressional Research Service report found that American multinational corporations reported 43 percent of their foreign earnings in just five tax-shelter countries, and Switzerland was among them, according to the ITEP report.

Malta

About 5 percent of Fortune 500 companies had a Malta subsidiary, according to a report from the ITEP. Companies with subsidiaries in the Mediterranean archipelago include Morgan Stanley, Thermo Fisher Scientific, Marriott International, Marsh & McLennan, Abbott Laboratories, Occidental Petroleum and Jones Lang LaSalle. While the corporate tax rate is 35 percent for local businesses, international corporations can pay as little as 5 percent in corporate taxes due to Malta’s complex tax system and refund policies, according to the BBC.

The island’s tax policies can also appeal to wealthy individuals: non-residents are taxed only on income arising in Malta, according to PwC’s tax guide.

British Virgin Islands

The British Virgin Islands do not have income taxes, corporate taxes or capital gains taxes, according to Deloitte’s international tax guide. Employers and employees do, however, have to pay a payroll tax, which ranges from 10 percent to 14 percent.

About 12 percent of the Fortune 500 companies had a subsidiary in the British Virgin Islands as of 2016, according to the ITEP report. Several of those companies have multiple subsidiaries in the island chain: AES has eight, Fluor has two, Goldman Sachs has six, J.P. Morgan Chase has four, Marriott International has eight, Morgan Stanley has five and Stanley Black & Decker has four.

The country’s gross domestic product is $1 billion, while the reported profits of US-controlled subsidiaries in the island nation are seven times as much at $7 billion, according to the ITEP report.

Hong Kong

the latest year for which information is available, U.S. subsidiaries in Hong Kong reported profits of $10 billion, according to the ITEP report. Among the major U.S. corporations with subsidiaries in Hong Kong are Goldman Sachs, Morgan Stanley, Thermo Fisher Scientific, Bank of New York, J.P. Morgan Chase, Pfizer, Citigroup, PepsiCo, Bank of America, Wells Fargo and several others. After the Netherlands and Singapore, Hong Kong has the largest number of Fortune 500 subsidiaries, with over 40 percent of Fortune 500 companies housing subsidiaries in Hong Kong, according to the ITEP report. The country attracts large companies who want to do business in Asian markets due to its taxation policies: its corporate tax rate is relatively low at 16.5 percent, and there are generally no taxes on investment income and capital gains, according to KPMG’s income tax guide.

Guidelines for Pakistan

Countries with Less or No Taxes are most attractive then others. Every investor whether Foreign or Local can invest his income on Heaven Appeals. Pakistan should focus on restructuring of TAX SYSTEM on the principles of Progression Tax based economy. The  benefit of this attraction is to get more dollars in Economy which leads to healthy reserves and overcome the GAP of Balance of Payment Deficit. The second benefit of these reserves are Multiplier Effect which may become the Income resource for Government of Pakistan.

 

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